• HEADLINES: Russian December 1s grain stocks data released; Soybeans/meal rally on chart buying/midday GFS slightly wetter S Brazil.

• Chicago ag markets are mixed at midday with meal/oil spreading causing a sharp swing in soy product values. Oil share wind and unwind has been one of the big features of the week with meal gaining today on chart-based buying. We argue that renewable diesel demand will not allow the US to export much additional soyoil, so any fall in the Argentine soybean crop is more bullish to oil than meal, but since the EPA RVO announcement of 2 weeks ago, the oil share trade has been exceptionally volatile. There is a bull demand story in soyoil that is lacking in soymeal. We believe that energy and soyoil will find new investor demand in 2023 with value in March soyoil noted below $0.61.

• Grain prices have traded either side of unchanged with the Russian assault on Ukraine infrastructure ongoing. Like last weekend, it takes just a strike on one of the 3 operating Ukraine grain export ports for worry to quickly develop regarding Ukraine’s shipping ability. Putin makes it difficult to be overly bearish of wheat with funds holding such a large net short Chicago position.

• Chicago brokers estimate that funds have bought 5,500 contracts of soymeal and 2,000 contracts of soybeans, while selling 3,200 contracts of soyoil, 2,000 contracts of corn and 1,000 contracts of wheat. It does not take much volume in pre-holiday trade to move these markets.

• Russia’s Rosstat (Russian Federal Statistical Service) indicated that Russian grain stocks as of December 1 were 39.4 million mt, up 10 million or 34% from last year. Russian December 1 wheat stocks were pegged at 25.6 million mt, up 8.8 million from 2021. Corn stocks at 3.3 million mt were down 1.3 million while sunflower seed stocks were down 250,000 mt or 8%. Rosstats surveys large agricultural enterprises for their monthly stocks data. The data hints that USDA’s 91.0 million mt wheat crop estimate is closer to right, though many in the private analytical field peg last year’s harvest between 95-101 million mt. The Rosstats December 1 data will not cause WASDE to make a change in their 2022 Russian wheat crop estimate in January.

• An estimated third of the 2022 Ukraine corn crop is still in the field due to a lack of harvest equipment, diesel, bad weather and now power outages. There are also reports of corn that is heating in bins as electricity for bin aeration is unavailable. The standing corn is likely to see its yield decline once harvest restarts in mid to late winter. Ukraine is offering corn for export in January at 35 over March futures, which compares to US Gulf January corn at $1.35 over. US Gulf corn is holding at a $1.00/bu premium to Ukraine corn.  Few offers are provided for Ukraine corn for February/March.

• The midday GFS weather forecast is slightly wetter for S Brazil with shower chances noted for late Monday/Tuesday with a thunder storm complex which looks to produce 0.25-1.50” of rain. The remainder of the forecast is similar to the overnight run with a pattern of rain impacting Western Argentina in the 6–10-day period. Heat will continue to December 22 before breaking with a cold frontal pass on the 23. The cooler temperatures and increasing rain chances will help advance crop seeding. Close attention will be paid to long range guidance as equatorial Pacific Ocean temperatures warm, and La Niña quickly fades. There is hope for an improved flow of moisture in Arg/S Brazil during January.

• Research favours long oil/short meal spreads and outright short soybeans/corn when Argentine weather normalises. The recent rain across N and C Brazil is producing favourable conditions with farmers discussing record soy yield potential. The US Congress has approved additional military aid for Ukraine which will produce new anxiety for Russia with fresh rocket/drone attacks this weekend. We see wheat in a broad trading range of $7.20-8.00 while soybeans struggle to surpass $15.00 and March corn $6.60.

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